The monsoon season has started again. The memories of last year’s horrific disaster due to a multi-day cloudburst centered on the North Indian state Uttarakhand is still haunting us. According to official records 4200 villages were affected and there were 5748 fatalities (the unofficial figure is multiple times this). People lost their entire life’s savings in the fraction of a minute.
Before this happened, who could have thought that there would be a possibility of floods at hill stations and earthquakes at a place like Latur, which falls under the lowest possible earthquake zone?
The loss was huge but unfortunately the percentage of insured households was close to nil at these locations. It is a sad fact that in India taking insurance to protect our property (especially our home) is not considered important, unlike the people living in western and other developed countries. Most of the here people are not even aware of the coverage available under home insurance. This article attempts to rectify that, by introducing you to the basics of home insurance and how it works.
Home insurance covers fire and allied perils (earthquake, storm, tempest, flood, inundation, landslide, terrorism, lightning, cloudburst, etc.), burglary, personal accident, breakdown of appliances, legal liability, jewelry (even when we are wearing it outside our home) and many more items. It is very essential that people should start looking at home insurance as an indispensable element of their financial planning. It takes a common man a minimum of saving for 10-15 years, as well as lifelong emotions, to make a house for himself and his family. But any such incident as what happened in Uttarakhand has the capacity to blow away all this in no time.
However, before you buy a home insurance policy, there are a few things you must consider:
- Market Value or Reinstatement Value – Market value is the value of your property less depreciation as per the age of the structure. Reinstatement value means the cost of rebuilding your house today. One should always choose the reinstatement value clause while purchasing home insurance.
- Agreed Value –Bajaj Allianz General Insurance Co. Ltd. has come up with a clause which is not available with other insurance companies, i.e., the Agreed Value clause. This is most beneficial if you are staying in an apartment or a multistoried building with different owners. Insurance companies cover the cost of construction on reinstatement or market value basis but in case of apartments, if after total loss the society is unable to rebuild the structure, the insured will get only the construction cost.For example –The construction cost of a 1000 sq. ft. flat in Mumbai is only Rs.25 lakh but the purchasing cost of such a flat will be more than Rs.1.5 crore in any average locality of Mumbai. If the society or other owners don’t choose to rebuild the building the insured gets only Rs.25 lakh. To cover this risk Bajaj Allianz has come up with the Agreed Value clause, where one can buy insurance at Rs.1.5 crore and at the time of total loss he will get the full value, while the ownership rights will be transferred to the insurance company. This also helps the financial institutions to cover their loan amount which is always higher than the construction cost but lower than the ready reckoner prices of that area. If you are staying in a multistoried building this clause is a must for you.
- All Risk Cover for Portable Devices – If the age of all such devices in your household (mobile phones, laptop, I-pad, etc.) is less than 5 years, then it makes sense to go for this cover, because there is a clause of new-for-old, valid up to 5 years. This is available with worldwide coverage option.
- Jewelry Cover – Chain snatching and burglary are very rampant in case of jewelry. One must get a cover for jewelry. Normally, for a sum insured up to Rs.10 lakh, self-declaration with the description of the jewelry (weight, type, price, etc.) is sufficient to take an insurance cover. But valuation certification is required if the cost of the jewelry is more than that. We provide worldwide coverage for jewelry, which means it is covered even when you are travelling with it.
- Other Covers – Artwork, curios and paintings can also be covered by providing the respective valuation to the insurance company.
The most important thing is that one must read all the terms and conditions of the product and policy before buying it to avoid any unpleasant surprises at the time of claim. We are getting more aware about our financial planning, so it is very important that we add home insurance to it along with our health and life insurance covers.
This article was authored as an expert opinion piece by Mr. Aditya Sharma – National Head of Websales, Direct Marketing, Travel Insurance, Home Insurance and Retail Health at Bajaj Allianz General Insurance Co. Ltd.
You can follow him on Twitter @adityarpsharma
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